Non-bank lenders vs Traditional bank loans

How do you choose a small business loan? The first thing to consider is which lender to make an application with. This is a quick guide to the advantages and disadvantages of traditional lenders as well as Non-Bank lenders.

The first thing to consider is small-business financing is usually a good option for business owners:

• With a clear roadmap for expansion or a clearly-defined short-term goal
• Who is able to make the repayments
• If you are aware of the terms and conditions that come with the loan. Your adviser or broker will be there to assist you with any concerns.

If you are ready to make an investment in inventory, new equipment or technology or staffing, additional training as well as a renovation or new building that could take your small enterprise to the next step If so, you may want to consider the pros and cons of taking on traditional bank loans versus dealing with an Non-Bank lender.

Online or bank?

Lending from banks

The brand reputation of a long-established bank is considered safe or solid and can also give a sense of security. New Zealand banks are registered with the Reserve Bank of New Zealand and are subject to the same regulations.

The application process for bank loans could be lengthy and complicated, and may require a large amount of paperwork which some small businesses owners may be constrained in time to fulfill. The process could be quicker in the event that the bank has digital acces to your bank records while banks aren’t generally considered to be data-savvy when it comes to small-business loaning, the situation is becoming better.

Similar to all kinds of loans it is possible that lower interest rates may be considered in conjunction with characteristics of loan products in order to select the most appropriate type of loan. Likewise, lenders Traditional bank loans might have strict requirements and cumbersome application processes, and may not be flexible.

Since cash flow is crucial to the survival of many small-sized businesses, the distinction between a loan that could be used to fund the sale of stock in the near future, and an offer for a loan next month when the seasonal demand is over can be the difference between a successful or unsuccessful business.

Online or non-bank business loans

If a good credit history and solid security are usually necessary for obtaining the bank loan, non-bank lenders can be more flexible with their approach. They could also have greater flexibility when it comes to structuring loans.

Non-bank lenders are usually more digitally innovative than banks, so applications can sometimes be completed and approved swiftly, with funds made available within the next dayafter approval.

There is a need to give details about what the loan is being used for as well as your company’s type and past history, as well in the event of providing security for loans that are larger, but because a comprehensive business plan as well as a lengthy application aren’t always part of the deal, things may move faster.

Beware of relationships, red flags and payments

If you’re in a long-standing relationship with a bank’s management or an other lender, you may contact them regarding their lending and application process. In other cases, your broker will assist you with the different lending requirements.

Many newer and non-bank lending institutions operate entirely online, some lenders like offer a dedicated specialist in loan to guide you through the loan application process and get to know your business’s needs.

If you’re considering non-bank lenders take a look at independent reviews. If an offer appears too promising to be true for instance, if you get pre-approval before you’ve even applied or if the lender appears extremely aggressive in their approach, consider speaking to an adviser or broker, and looking into the matter prior to signing the contract.

If you’re borrowing money from a bank or a Non-Bank lender, it is important to know the terms of the loan and realistic about whether you’ll be able meet the loan repayments. One of the most important considerations is creating a set of rules for yourself and deciding if business loans should be used to boost your business’s performance in managing the seasonal changes in fluctuating cash flows, or to make the most of opportunities to buy inventory in massive quantities, or to pay for everyday expenses and operational costs.